The government has announced a new scheme for first-time buyers called Your First Home. If it goes ahead as described, eligible buyers could buy a new-build home with a deposit of just 2.5%.
The full details are due to be confirmed in the Budget at the end of October. Here's what we know so far and what it could mean if you're hoping to buy your first home.
At a glance
- Expected minimum deposit of 2.5% on eligible new-build homes
- A 20% government-backed equity loan with an initial interest-free period
- Household income caps and local property price caps are planned
- Eligibility, price caps, lender involvement and the longer-term cost of the equity loan are still to be confirmed
What is Your First Home?
Your First Home is a new equity loan scheme for first-time buyers purchasing a new-build home in England. Based on the government's announcement, it's expected to offer:
- A minimum deposit of 2.5%
- A 20% government-backed equity loan
- An initial interest-free period on that loan
- Access to new-build homes from developers who sign up to the scheme
The government has also said there will be household income caps and local property price caps, but these figures haven't been published yet.
How much deposit would you need?
This is the part that's grabbing the headlines. Saving a deposit is often the biggest hurdle for first-time buyers.
According to Rightmove, the average asking price for a typical first-time buyer home (up to two bedrooms) is £225,199. A 2.5% deposit on that would be around £5,630.
Prices vary from area to area, so the figure for your next home could be higher or lower. Either way, needing less upfront could bring buying a home within reach for more people.
Why is the government introducing it?
Borrowing has become more expensive. Rightmove reports that the average two-year fixed mortgage rate is now 5.49%, up from 4.53% a year ago.
The government says the scheme is designed to help buyers overcome the deposit barrier while also supporting the building of new homes.
Could it save you money each month?
Potentially. The government says the interest-free period could save buyers hundreds of pounds a month compared with a standard 95% mortgage.
How much you'd actually save will depend on:
- The price of the property
- The size of your mortgage
- Mortgage rates at the time
- How long the interest-free period lasts
- The cost of the equity loan once interest starts
Buying now usually means a deposit of at least 5%, with some government support already available, and you can choose from both existing homes and new-builds. Your lender’s rate applies to the full mortgage. The proposed Your First Home scheme is expected to require just a 2.5% deposit, with a 20% government-backed equity loan that may be interest-free initially, but it is expected to apply to new-builds only. Full details are still to be confirmed.
What we still don't know
The outline is there, but some of the most important details are still missing:
- How long the interest-free period will last. The government has confirmed there will be one, but not for how long.
- What interest rate will apply afterwards. Interest will eventually be charged on the equity loan, but the rate hasn't been announced.
- Local property price caps. These are expected to be set out in the Budget.
- What lenders will offer. Each lender will decide how much it's prepared to lend under the scheme.
- Which developers will take part. Only homes from participating developers will qualify.
- When you can apply. Timescales and how to register are due to be announced in the Budget.
Is it the same as Help to Buy?
There are clear similarities. Help to Buy ran in England from 2013 to 2023. In its final form, buyers could purchase a new-build with a 5% deposit, while the government lent up to 20% of the property's value (40% in London). That loan was interest-free for the first five years.
Your First Home looks set to follow a similar model, with a 20% equity loan and an interest-free period. The main differences so far are the lower 2.5% deposit and the planned income and price caps, which are intended to target support where it's needed most.
You don't have to wait
If you are ready to buy, there's already help available. Existing options include Shared Ownership, First Homes and a range of low-deposit mortgages.
Your First Home is also expected to apply to new-build homes only. If you would rather buy an existing home, the current options are still worth exploring.
Talk it through with our mortgage team
Every first-time buyer's situation is different. Our in-house mortgage advisers can talk you through the options available to you now, and help you weigh them up against waiting for Your First Home.
We will keep an eye on the Budget announcement and share the confirmed details once they are published.
To speak with one of our mortgage advisers, contact your local Richard Kendall office. You can also register with us to hear about suitable properties as they become available.
Your home may be repossessed if you do not keep up repayments on your mortgage.
This article is for general information only and is based on details announced by the government at the time of writing. It is not financial advice and should not be relied upon when making financial decisions. Please seek advice from a regulated mortgage adviser.
